Merging your RIA Firm: How Well Do You Know Your Prospective Partners?

Phillip Flakes | Aug 20, 2014

Merging your financial advisory practice with another is an effective way to scale your business, but it's not hard for the merger to get derailed if you don't do your due diligence upfront. One of the most important steps in due diligence is making sure you get to know your new partners.

That may seem like common sense. After all, you certainly need to know your partners if you're going to go into business with them. However, many advisors make the mistake of only getting to know their new partner on a cursory, professional level. That's likely a mistake.

Try to make an effort to really get to know them, both on a professional and personal level. Take them out to play golf. Get your families together for dinner or a sports game. Some advisors will even hire a coach to ease the transition. Whatever you need to do, make sure it gets done so that you're not surprised by who you end up in business with.

Why's it so important to know your new partner? The most obvious reason is that you want to make sure your personalities are aligned. Is this someone you can have difficult conversations with? Are you able to speak freely with each other? Is there anything about the person that might grate on your nerves over time? These are all important things to consider before you merge.

However, you also want to know what drives the person. What makes him or her tick? Why do they do what they do? What are their goals and ambitions? In the period leading up to a merger, an advisor may say what they want to say just to get the merger done. By getting to know the person, you can have more confidence that their stated goals are in fact their real goals.

Taking the time to get know each other also speeds the development of your trust for each other and your communication skills. You likely know from dealing with clients that the relationship can take a big step forward when you get the client out of the office and do something that's just fun. You could find that you have a common interest or develop a rapport that would have never otherwise existed. The same is true of your new partner. You'll still be getting to know each other long after you merge. You can accelerate the process by starting it as early as possible.

Finally, it's not just important that you and your new partner get to know each other. Your staffs should as well. Organize a group outing to something fun or to dinner. Maybe even have an offsite workshop and hire a team coach to come in and moderate it. You don't want your staffs clashing after you merge, so it's important that you lay the foundation for a good working relationship.

Your decision to merge will likely yield positive results. However, you need to lay the groundwork for success. Take the time to get to know the other party. That investment of time will likely payoff in the future.